Top Trade Ideas for the Week of October 17, 2011: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

Pandora Media, Ticker: $P

Pandora Media, $P, is moving higher and testing a 38.2% retracement of the move lower off of the IPO pop. As it rises the Relative Strength Index (RSI) is moving higher and then Moving Average Convergence Divergence (MACD) indicator has started growing again. These support more upside. There is resistance higher at 15.57 followed by 16.94 and then 17.67. There is also a Measured Move (MM) to 17.05, comparing to the move from September 12 to the peak at 14.65 September 30. Premium users played this first part of this move higher with an options trade last week. This can still be played from the long side entering on a move over 15.57 with a 3% trailing stop and taking off 1/3 at 16.94. Tighten the stop there to 2% and then take off another 1/3 on a touch of 17.67, a 50% retracement of the move. Form there move the stop to a 1% trail and let it ride. This can also be played using options by buying the November 16/18 Call Spread, buying the November 16 call and selling the November 18 call. This was available at a debit of 70 cents near the close Friday, giving a reward to risk ratio of 2.85:1, and a maximum potential profit of $1.30 if it closes over 18 on November Expiry. For more leverage you could also sell the November 12 Strike Put against it to reduce your cost to free or gives a small credit. There is support at 12 from this last leg up. Selling the Put exposes you to owning the stock if it closes below 12 on November Expiry and uses margin, but also increases the maximum profit potential to $2.00. If it does continue higher then you could consider reducing your margin usage and removing expose to owning the stock by buying back the short Put, or just let it expire worthless.

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After reviewing over 900 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Saturday which looks for Gold to continue in its consolidation with a slight bias to an upside break, while Crude Oil continues higher with resistance nearby. Both the US Dollar and US Treasuries look poised to continue their recent moves lower. The Shanghai Composite and Emerging Markets also look to continue their recent moves higher but with resistance near and within the downtrend. Volatility appears to be receding and combined with the falling US Dollar and US Treasuries provides a solid background for Equity Index ETF’s, SPY, IWM and QQQ to move higher. Use this information as you prepare for the coming week and trade’m well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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